Americans' Credit Card Debt And Delinquencies Jump Led By Millennials

American's debt with credit cards is growing at a faster pace than in other categories. Delinquencies are also accelerating.

Those are some of the conclusions of the Federal Reserve Bank of New York's quarterly report on household debt and credit.

Credit card balances increased by $48 billion in the third quarter, or 4.7% from the second quarter, to $1.08 trillion, the New York's Fed said in the study. Overall household debt rose 1.3% to $17.29 trillion.

Housing debt, student loans and car loans, which are other components of the analysis, also increased, but at a slower rate than credit cards.

It was the eight-consecutive quarter of the increase in credit card balances. On a year-over-year basis, the nominal gain of $154 billion was the biggest since the data started being analyzed in 1999, the Fed said.

Millennials in debt

The report also shows that credit card delinquencies are now above pre-pandemic levels. Millennials, or those born from 1980 to 1994, are the group with highest default rates.

"Credit card balances experienced a large jump in the third quarter, consistent with strong consumer spending and real GDP growth," Donghoon Lee, economic research advisor at the New York Fed, said in the report. "The continued rise in credit card delinquency rates is broad based across area income and region, but particularly pronounced among millennials and those with auto loans or student loans."

The study doesn't indicate the reasons behind the increase in delinquencies in credit card debt.

"The labor market and the general economy have remained resilient throughout this period which makes pinning down the causes of rising delinquencies rates more difficult. Whether this is a consequence of shifts in lending, overextension, or deeper economic distress associated with higher borrowing costs and price pressures is an important topic for further research."

Another study released on Oct. 25 by the Consumer Financial Protection Bureau revealed that American consumers paid a record $130 billion in credit card interest and fees in 2022. The government agency expressed concerns that consumers are facing higher costs and growing debt while profits of credit card companies are now higher than before the pandemic.

American Express said in its earnings statement, released Oct. 20, that it increased provisions to cover credit losses as customer delinquencies rose from a year earlier.

The company noted in the third-quarter earnings report that credit metrics remained strong in the third-quarter, with net write-off and delinquency rates for total card member loans and receivables still below pre-pandemic levels.